Cross-border protocols in the context of insolvencies of multinational enterprise groups are agreements or frameworks designed to handle the complex issues that arise when a multinational corporation with operations in multiple countries becomes insolvent. These protocols aim to provide coordinated and coherent procedures for the administration of insolvency proceedings across different jurisdictions. The primary goals of cross-border insolvency protocols are to:
What Is Cross-Border Protocols In Insolvencies Of Multinational Enterprise Groups
- Enhance Cooperation: Facilitate communication and cooperation between courts and insolvency practitioners in different countries. This is critical because each country has its own insolvency laws and procedures, which can lead to conflicts and inefficiencies.
- Maximize Value: Ensure that the assets of the insolvent enterprise are used in the most effective manner possible, thereby maximizing returns for creditors and other stakeholders. This often involves coordinating asset sales and agreements on how to distribute proceeds among various jurisdictions.
- Reduce Costs and Delays: Simplify and streamline the insolvency process across borders to minimize legal and administrative expenses and reduce delays that can erode the value of the insolvent enterprise’s assets.
- Protect Stakeholders’ Interests: Balance the interests of all parties involved, including creditors, employees, and shareholders, ensuring that rights are protected as much as possible within the framework of the different legal systems involved.
- Preserve Going-Concern Value: In cases where the business or parts of it can be saved, protocols aim to preserve the economic value and jobs, which might be more beneficial than a piecemeal liquidation.
Several international instruments address cross-border insolvencies, including:
- UNCITRAL Model Law on Cross-Border Insolvency: Provides a legal framework that countries can adopt to address the challenges of cross-border insolvency. It emphasizes cooperation and coordination between courts and insolvency practitioners.
- EU Regulation on Insolvency Proceedings: An EU instrument that provides coordinated rules for insolvency proceedings within the European Union, allowing for a single insolvency proceeding within the EU to be recognized and enforced across member states.
Cross-border insolvency protocols can also include guidelines for debtor-in-possession financings, procedures for filing claims, mechanisms for resolving disputes, and processes for the approval and implementation of reorganization plans. These protocols are often developed on a case-by-case basis, taking into account the unique circumstances of each multinational enterprise’s insolvency situation.
